The Right Time to Sell My Business

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The Right Time to Sell My Business?

 

 

When is the right time to sell my business.  Timing is Everything.  As a business owner this is a question I faced and as a business broker I realize many business owners have this same very important decision.

The answer on the right  timing is different for most all business owners.  Furthermore the answer may lie more in the question(s).

Do I want to sell my business…. or do I want to transition it to family or just close the doors or other?

Do I sell it when the business is not doing well?

Do I sell it when the business is doing well?

Do I sell my business when the economy is down?  Economy is doing better is now the time?

How do I even begin looking at the process and time involved to sell my business?

Health. life, age, family, money,  are all factors that go into this very important decision. A business sale does not occur within a vacuum .

What is going on in my business , in my industry, in our current economy, in our  economy going forward  all affect value.

What effect does the aging Baby Boomer population have.  Estimates I see are we have approx. 75 Million Baby Boomers in the US which is almost 25% of our population (born between 1946 and 1964 so current age group of  54-70).  Many of those will exit business over the next several years.

Will there be a “glut of available businesses for sale?  Will this drive down the prices?

I don’t know but do believe it could affect values.

While running my business I had interested unsolicited parties come forward with an interest in acquiring my business, discussion were had and we even got to the points of an LOI (Letter of Intent) and Purchase offer being presented.  The offers were reasonable but I was “not ready”.  When consulting with my CPA, his advice to me is “You will know when you are ready”.  I continued to run my business for another 10 years and hit a point  when “I was ready”.

Selling ones business involves a lot of moving parts.  I do believe it is prudent to sell your business under your terms, not based on terms dictated to you.  (health, divorce, legal matters or other negative event forcing a sale)

As a business owner we deal with risk.  We do our best to mitigate risk but the risk of owning a business is carried with us until we know longer own that business.  Mitigating the risk of  having to sell your business under terms not dictated by you should be a priority.  So if you are “not ready”  Is it time to start getting ready ?

  • Gain knowledge about the process
  • Have a realistic view about the “salability” of your business.
  • Know that selling a business when that business  is doing well is significantly more doable than a business  in a lesser state.
  • Know that not all businesses that try to sell DO NOT and or maybe sell for a fraction of perceived value.
  • Have a plan

 

A lot go into the decision of the “Right Time” to sell a business. And part of my job as a business broker is sharing my experiences with the process.  But being ready psychologically, emotionally, financially is a timing question that only you can answer.    “Are you Ready ?” or are you “Ready to start getting Ready”.

Scott M Messinger is a Business Broker working with Business Sellers and Buyers focused in South Carolina Florida and Southeast USA.  For more information go to SellaBusinessAdvisors.com

What is My Business Worth

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What  is My Business Worth  ?

What  Is my Business Worth ?  It is a Question I have asked as a Business Owner, As a Business Buyer I have asked myself How much is this business worth.  As a Business Broker I have had a Business Owner ask me my opinion regarding how much their business is worth .  And as a Business Broker I have had a potential Business Buyer ask me what a business may be worth.

what is my business worth

Business Broker South Carolina Florida

What is my Business worth ?  It depends, Depends on what?  The list can be long.

Type of Business,  Industry, customer base, difficulty of business transition, How the business is currently being run, how the business can be run, assets,  does the business enjoy recurring revenue, what sort of cash flow is business generating are a few determinant factors.

Cash Flow may be the most important price determinant of this list.  How much is the business making?  How much is the business making the owner? (Owner Benefit or Adjusted Cash Flow-  this is different than Net Income and or Profit that may show up on companys P&L or taxes).  What multiple of cash flow will this business sell for? In our recent market conditions the lions  share of Main Street type business are sold at multiples of cash flow in the 1.5- 3.5 time adjusted cash flow.  Some do sell for more some for less.

Often a Business Owners decision to sell is based on- what is my business worth . What can one expect to “Net”  from the sale of the business OR is  continuing to run the business a better fit.

Business value can vary from buyer to buyer and the business value to the Seller can be different than the market value.

The market value of a business is ultimately defined by what a willing capable buyer is willing to pay for a business.  IF 3 potential buyers are willing to offer $400,000 for a specific business and that business owner wants to sell for $600,000 is the Business Seller wrong for wanting to sell for $600k?

A Business Seller says – this is what my business is worth.  A Business Buyer says -no it is not, but this is what the value is to me- who is right?  they both may be right or they may both be wrong.   But if you truly  have 2 interested parties,  it is not a matter or right or wrong rather a question of can you find some common ground to further discussion.

The value of a business to a “Strategic Buyer” which could be a competitor, supplier or related business, could be different than the value to a “Financial Buyer”,  or an individual looking to acquire a business for existing cash flow and possibly increase the cash flow /value of the business.

When looking at Business Worth or Business Value what you are ultimately looking at is what is the  “Most Probable Selling Price” – which is different than an Asking price or Listing Price.  A Seller  can ask whatever he/she chooses,  but will there be a buyer at that price.  “This is what I want for my business” or This is what I need for my business” also can be different than a Selling Price.

I believe an effective means to try to get to the Most Probable Selling price of a business is an approach that can be both simple and difficult.

Can  the Seller of a business attempt to take on the perspective of a Business Buyer ?   I think the likelihood of setting  Selling/Buying terms, goals, values that are achievable are greatly increased.  Can the Seller look at his/her business through the eyes of a buyer?

Seller may say- ” I want my full asking price all up front”

Buyer may say – ” Doesn’t’  the Seller believe in his business and show it by being willing to hold a note”.

Seller says ” I want 5 times my  cash flow because I have a great business”

Buyer says- “most other businesses like yours are sold at 2 times cash flow”

Seller says- “This is what I want for my business”,  So the question to the Seller  would be- “Would you as a business buyer pay that for your business? – You are knowledgeable and experienced in your field, Would you pay all that money at closing or would you as a business buyer pursue some Seller financing or “holdback” , you are looking for a good value,  would you pay over double what other like business are being sold for?

Again-  “What is my Business Worth”-  It is what a qualified , capable party is willing to pay, but looking at Selling your business through the eyes of one trying to buy a business can provide an invaluable perspective.

Scott Messinger is a Business Broker as well as a current and former business owners.  Business experience over the last 30 years includes personally buying 9 businesses, starting, growing, running and selling  a successful business, and representing buyers and sellers as a business broker.  For further Info call (239) 770-2421 or Scott@gwbusinessadvisors.com  Looking for a Florida Business For Sale?

 

7 Steps to Buying a Business

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7 Steps to Buying a Business

buying a Florida business

Steps to Buying a Business 

Buying a business requires planning and an organized approach.  Many Business Buyers that are Buying a business in South Carolina or Florida businesses do come from out of state.  I am a Business Broker focused in both South Carolina and Florida.  Prior to being a business broker I started and owned my own business and purchased 8 businesses to to supplement our organic growth.  The last 2 business I sold about a month ago had both business buyers from “up north”. The steps to buying a business  can vary depending upon each individuals situation and goals.  Below are some steps that may apply to many business buyers.

1. Have you had “the talk” with your significant other?-  Have you discussed your thoughts, ideas with your significant other?  Does buying a Florida business mean a relocate?  If so how does that affect those most important around you?  I started and owned and sold my own business and to think about making any of these decisions without my wife is unthinkable. I work with a lot of potential business sellers, and when I ask if they have discussed with their wife of 10-20-30 years and they say no, I know  that the decision still has further steps to take.

2. Consider your capabilities.  What are your realistic financial means to buy a business.  Do you need a business that offers Seller financing or do you plan to seek financing from a bank or other?  What is both your true skill set and what sort of businesses do you have an interest in.  And, do you have the financial capabilities to buy such a business, and or or their technical or license requirements that could me met by you.

3.   Geography- both South Carolina and Florida are big states!  Are you looking to buy a business in a certain part of the state or ok for most any part of the state(s)?

4.  Start Looking around.  It’s easy from anywhere in the world to jump on the internet and search for a South Carolina or Florida Businesses For Sale.   This is a very easy part of the process.  But how do you advance your search from casual looking around to trying to reach a goal of for example wanting to buy a business within 6 months.  For every hundred of people that “look to buy  a business”  only a few actually do.  Looking  thru websites is generally a free and fairly benign exercise.  Engaging with someone that understands the South Carolina or Florida market advances your efforts from “looking around” to trying to fulfill a goal.  Contact a business broker and have a dialogue and seek out assistance from someone that engages in this process on a regular basis, and understands the marketplace.

5.  The vetting process.  Getting information from the internet on businesses for sale can provide certain minimal information.  To receive detailed info confidentiality agreements will be signed.  Expect information exchange to be a “2-way street”, you will desire information on a business sellers business including financials, company background and  history.  A business Seller will require information on you, including your financial capabilities and  your background.

6.  Meeting with the Business Seller.  A Business buyer can “meet” a business owner via a phone conference call, but a face to face visit with the owner will allow both the prospective business buyer and Business Seller, to either develop a comfort level to move forward or move on. A successful meeting could result in a contingent offer being generated/presented.

 

7. Generating a business offer to Purchase-  After finding the business that meets your requirements, an offer is generated and presented to the business Seller.  At times an LOI (Letter of Intent) may also be utilized.  The business Seller has the option to accept, reject or make a counter offer.

If accepted, due diligence is pursued with the goal of satisfying the wants of the business buyer and reaching a business closing date whereas the prospective business buyer achieves the goal of being a business buyer. The steps to buying a business can vary greatly.  Having an organized approach and realistic expectations can go a long way towards finding and buying the right business. 

Selling Your Business How to Find a Buyer

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Selling your Business How to Find a  Buyer

Selling your business

You have decided you want to sell your business.  How do you find a buyer for your business?

When a business has been in existence for many years, 10-20-30-40+ years it is not uncommon for the business owner to be approached about selling his/hers business. Or it is not uncommon to “hear about someone interested in buying the business” or have someone express “interest in buying the business”.  Selling your business can be a challenge.   I have seen and experienced this as a business owner and as a business broker. So one may think  “if these  people are interested in buying the business and I’m not even trying to sell it, I think it may be very doable to find a buyer when I am ready to sell my business.” But like a lot of other complex processes, “the devil is in the detail.”  Often  , when ready to sell your  business,  it turns out the person  or competitor, or strategic buyer prospect that was interested in the business 1,2, 3 years ago, is no longer interested- their situation has changed.  Or the guy that said he knew someone  that was interested in the business, doesn’t have the resources to consummate a deal. So how does a business owner find a buyer for the business. 1. Try to find a buyer on his/her own. 2. Hire a Business Broker to find a buyer.   Neither options are guaranteed. What is generally not known by one trying to sell a business is that MANY  businesses that actively try to sell their business DO NOT SELL.  Industry statistics show that well over 1/2 of all businesses that actively try to sell actually do NOT  transition the business to a new buyer. But it is with little doubt that hiring a qualified business broker greatly increases ones odds of finding a buyer.  It is my opinion that a significant reason why utilizing a business broker is the simple fact that most business owners already have their hands full running their business.  And then to add  the components of selling a business to their day is barely doable at best. Marketing the business, vetting out buyer prospects, tire kickers, not disclosing the confidential component of the sale are just a few responsibilities that are easy to do  while continuing to run their business.   Often there is not enough hours in the day to get all that done and run the business. A business broker is able to have “generic dialogue” with competitors and strategic buyers without disclosing the name of the business.  If  Mike from Mikes Towing approaches ABC towing about buying their business, then ABC business knows Mikes Towing is for Sale. If Scott from XYZ  Business Brokerage approaches ABC Towing about a Towing business in the Jacksonville Florida area- confidentiality is maintained. But as a Business Broker we market  looking for business buyers across many different platforms, often searching locally, regionally, nationally and internationally.    So often business buyers are from “Somewhere else”.   Also a business buyer is someone that buys a business.  About 9 out of 10 people that approach about an interest in buying a business don’t buy a business.  They may one day, but that may not be this year or next year.  They are prospective business buyers.- As a business Seller you are looking for a Business Buyer. I personally have bought  several business over the last 25 years. I have made the decision to buy a business- found a business that met my goals and then concern myself greatly if I cannot effectively acquire the business   Many “Business Buyers” looking for a business do not ever make an offer on a business , or buy a business.  They may be a perpetual business buyer prospect, or they may truly be ready to take the next step and be a business buyer. Knowing the difference between a prospective business buyer and actual business buyer can be the difference between an effective sale or a frustrating  time demanding process .   Selling your business can be a challenge. For More information on Selling a Business or Buying a Business  Scott M Messinger (239) 770-2421

Is Selling Your Business The Right Choice For You?

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Is Selling Your Business The Right Choice For You?

Is Selling You Business the right choice for you ?

When a small business owner is considering the sale of his or hers business there can be an extensive search to find answers regarding the process.  Before one finds the answers or proper information as it relates to the sale of a business, you must know the questions to ask.  Most small business owners are not born with the knowledge on how to sell their business.  Furthermore most small business owners have not sold a business before ,therefore gaining knowledge and information on the best way to sell their business is essential.

Again each business is different and each business owner and business owner situation is different, but below please find a list of questions to consider that may be helpful in the process of selling a business.

        Are Your Ready To Sell Your Business?

Are you ready- Are you emotionally ready to sell your business?- Almost 20 years ago when approached about potential buyers looking to buy my business, I asked my CPA for his advise which I followed and still subscribe to today.  He told me “You will know when you are ready”.  I tell  those I advise today if you wake up one day and think its time to sell your business- take some time and reconsider.  If you wake up 30 days+ in a row feeling you want to sell your business- then maybe its time to sell your business.

Is Your Business Ready?

Is your business ready for you to sell your business?-  Are your financials in order.  In other words do you have accurate financial records that are both accurate and understandable.  Do you have systems and or policies and procedures in place and documented?

                What Is Your Business Worth?

What effect does the amount of money you would get from the sale of your business have on your decision. Is it your complete retirement money?  Is it enough to allow you to exit to pursue your next venture?  What is the difference between what you need the value to be and the actual value.

Getting Others To Help You Sell Your Business

DO you hire a business broker to sell your business?   Can your CPA or your attorney sell your business?  Can you sell your business yourself?  I am a business broker and sold my own business and also purchased multiple businesses as a business owner.  Yet after the sale of my business I chose to be a business broker as I recognized the value and confidentiality a business broker can provide. Furthermore most business owners are busy running their businesses before they add they task of trying to sell their business to their work day.

                Should You Improve Business Before You Sell It?

DO you buy that new truck?  Do I spruce up the inside of my stores?  Do I hire that new employee?

I always advise business sellers to run the business as you will own the business for the next five years.  There is a chance the business will not sell or take a long period of time.  Continue to make your business better and attempt to add value.  Certain Capital expenditure  should be carefully weighed, but continue to try to improve your business.

How Long Will It Take To Sell Your Business?

It seems that typically it will take longer for a business to sell than a business owner may originally think.  I suggest the 1 year time frame as a guideline but again all businesses are different and asking price for a business can strongly influence the time it takes to sell a business.

 

My Personal Advice When Selling Your Business

Every business is different and every business owner  and business owners situation is a little different.  But there also is some commonality shared.  My perspective on this matter is that of one that has started a business, personally purchased several businesses, sold my own business and have helped others buy and sell businesses.

I understand and respect the decision of selling a business is a very important and complex decision and process.  It is NOT all about the money.  The sale of a business  involves multiple facets including  price, emotions, financing,  lifestyle, families  and personalities.

When considering if it is time for you to sell your business spend some plenty of time seeking some answers, but begin with the questions most important to you.